Motor Industry

Part of the debate – in the House of Commons at 4:52 pm on 12th December 1983.

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Photo of Mr Bryan Gould Mr Bryan Gould , Dagenham 4:52 pm, 12th December 1983

I am glad to agree with the hon. Gentleman. If he had listened a little more carefully, he would recall that I prefaced my remarks about the components industry by saying that it had moved its operations for perfectly rational economic reasons, to take advantage of the much bigger car industries developing on the continent—as the British industry declined—and to take advantage of a generally more favourable manufacturing climate.

I was dealing with our external trade performance in the passenger car industry. I regret that the impression has gained ground in this country, assiduously promoted by some people, that we suffer particularly at the hands of the Japanese.

We know that the Japanese are not doing the major damage to the British car industry. EC car industries have secured the greatest penetration of our market. At present they have over 40 per cent. of the domestic market. No doubt the Japanese could do better than their current 11 per cent., but it is the EC that is ripping the heart out of the British industry. One telling fact illustrates precisely what has happened since we joined the EC. When we joined, we could sell it eight cars for every five that we imported. At present, believe it or not, we can sell it only one car for every 10 that we import. That is a staggering turnaround in such a relatively short time.

Although the EC is damaging our domestic car industry, it is Japan that is rightly and understandably so often held up as the model of a modern car industry. People visit Japan. The Prime Minister did so fairly recently. Many of them, including the Prime Minster, return with what can only be regarded as rather simpleminded explanations of why the Japanese have been so successful. The usual explanation offered is that the Japanese work hard and are free from industrial relations problems. That may well be true, but who can marvel at the differing industrial relations records in the Japanese and British car industries when one considers the Japanese car worker's experience over the past 30 years? He has had the unbroken experience of rising wages, rapidly rising living standards, total security of employment and participation in an industry which is universally regarded as successful. The British car worker has had an almost completely contrary experience.

The British car worker has had problems hanging on to his job and he has been constantly under pressure as real wages, compared to the rest of the wages structure in this country, have been driven down, and he is almost universally reviled as workshy and strike-prone. The real reasons for the Japaneses success lie elsewhere. They do not lie in the differing industrial relations records which are a consequence rather than a cause of the differing performance of the two industries. The reasons lie in things such as a stable expanding domestic market upon which manufacturers can plan long term. They had a protected market when their nascent industry needed that protection. Another factor has been close co-operation and trust between Government and industry which has been reflected in the availability of long-term and practical finance to the Japanese industry. That should be contrasted with ridiculous monetarist policies in Britain.

The Japanese industry has been given plentiful, long— term and cheap finance. Japanese interest rates have traditionally been low. The result of such sensible economic policy is that the Japanese yen has been maintained at a highly competitive level. The Japanese do not share our ridiculous preoccupation with currency as a national virility symbol. They could not give a damn whether the yen is an international currency of any standing. When one considers Japan's immense participation in world trade, it is salutary to remember that only 3 per cent. of world trade transactions are carried out in yen.

As a result of the sensible macroeconomic policies that I have described, which are designed to create a favourable climate for manufacturing industry and to promote competitiveness and profitability, the Japanese have the money necessary to develop new green field sites, to install the latest technology, to pay high wages which lubricate industrial relations and to buy the best talent available. It is little wonder that they have been so successful.

Britain's experience has been quite the reverse. We have had no stability in the domestic market. Purchase tax constantly went up and down, and when its use as a regulator was finally abolished we had the special car tax. When the Japanese were protecting their domestic industry, we, in a state of weakness, were dismantling our protection and opening up our market to countries in and on the fringe of the EC. In Britain, industry and Government have often been at loggerheads. They certainly do not work together or trust each other. We have not had expansion as a result of cheap money or low interest rates, but rather contraction, deflation and a monetarist ratchet which has squeezed the economy and demand and forced up interest rates. That has made investment almost impossible. Furthermore, it has forced up the value of the pound to a ridiculous level.

The hon. Member for Northfield mentioned the welcome success of Jaguar. How big a factor in that success has been the 40 per cent. fall of the pound against the dollar? It just happens that Jaguar's principal market is the United States. I cannot think of any business man or salesman whose job would not be a little easier if the price of goods he was trying to sell was reduced by 40 per cent.

That catalogue of mistakes which have been pursued most by the Government, though they are not the only ones, have produced a much weaker and smaller industry than Britain must have. The picture is even worse than that revealed by the stark facts and figures. The industry would be revealed to be in a far more parlous state if it were not for political pressures on importers who would otherwise be able to take over the British market. The Japanese could close the British car industry tomorrow. They have not done so because they know that the result would be tremendous political uproar. The British car market is artificial. Everyone has some interest in maintaining its artificially high prices. If we were to have a truly competitive market, the British car industry's plight would be even worse than it now is.

I have in my constituency a major multinational car manufacturer—Ford. I pay tribute to it. I am not one of those who argue that the problems of British industry, especially the car industry, are a result of wicked policies pursued by multinationals. We are lucky that some parts of our car industry are in the hands of multinationals which have greater resources and are therefore more able to resist short-term market forces. If it were not for that resilience, Ford and many other manufacturers would have upped and gone a long time ago. The multinationals cannot be patient for ever.

Ford of Europe gave an important warning to the Civil Service and Treasury Select Committee which examined international monetary arrangements in the previous Session. I am glad to see that the hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark), who was a member of that Committee, is present. He will recall that Ford gave evidence to the effect that its problems, when considering future investment in Britain and sourcing policy for the British market, were directly and severely affected by the Government's macroeconomic policies. It made it clear that the pursuit of high interest rates and an over-valued exchange rate put a serious question mark over its willingness and ability to remain as a major manufacturer in Britain.

It would be disastrous if a major manufacturer such as Ford were forced to withdraw its manufacturing from Britain. I shudder to say it, but that is emerging as a long-term possibility. If Ford is forced to make such a decision, I fear for the rest of the British car manufacturing industry. I have pleasure in agreeing with the hon. Member for Northfield that we cannot afford the balance of payments loss, the employment loss and the loss to industry as a whole associated with a car industry which is failing to pay its way and expand. Worst of all, my constituents could not afford it. For that reason, if for no other, I shall continue to urge a change of policy, as that alone will guarantee the future of the car industry. Only a change in the manufacturing climate can guarantee the future that the hon. Member for Northfield and I want.